Accounting for Corporation

BASIC CONSIDERATIONS
 Republic Act No. 11232 - Revised Corporation Code
of the Philippines

Revised Corporation Code Of the Philippines

(Sec. 2) defines Corporation as:

an artificial being created by operation of law,

having the right of succession and the powers,
attributes, and properties expressly authorized by
law or incidental to its existence.
Corporation
➢ An artificial being with a personality separate and apart from
its individual shareholders or members.
➢ is an legal entity created by state law.
➢ it has a distinct and separate existence from the individuals
who created it, and those who control its operations.
➢ are commonly classified as profit or nonprofit, and public or
nonpublic.
❖ Profit corporation's survival depends upon its ability to
make profits.
❖ Not-for-profit corporation relies on donations and grants.
❖ Public corporations issue stock that is widely held and
traded.
❖ Shares of a nonpublic corporation are usually held by a
small number of individuals.
Classes of corporations:
1. Stock corporation - is one which has capital
stock divided into shares and are authorized to
distribute to the holders of such shares,
dividends, or allotments of the surplus profits on
the basis of the shares held.
2. Nonstock corporations – is one where no part of
its income is distributable as dividends to its
members, trustees, or officers and any profit
which it may obtain incidental to its operations
shall, whenever necessary or proper, be used for
the furtherance of the purpose or purposes for
which the corporation was organized
Corporators and Incorporators, Stockholders and
Members
Corporators - are those who compose a
corporation, whether as stockholders or
shareholders in a stock corporation or as
members in a nonstock corporation.

Incorporators are those stockholders or members

mentioned in the articles of incorporation as
originally forming and composing the
corporation and who are signatories thereof.
 ORGANIZATIONAL STRUCTURE OF A
CORPORATION

1) Shareholders of a corporation elect the board of

directors.
2) The board of directors are responsible for
determining corporate policies and electing
officers.
3) Officers are responsible for operations and hiring
employees. When shareholders are not pleased
with the performance of the board of directors,
they can elect new directors.
 Characteristics of Corporations
Advantages:
• Separate legal entity: corporation that
conducts its affairs with the same rights,
duties, and responsibilities of a person.
• Limited liability of stockholders: Stockholders
are neither liable for corporate acts nor
corporate debt.
• Transferable ownership rights: The transfer
of shares from one stockholder to
another, usually with no effect on the
corporation or its operations.
• Continuous life: A corporation’s life continues
indefinitely because it is not tied to the
physical lives of its owners.
• Lack of mutual agency for stockholders: A
corporation acts through its agents, who are
its officers and managers.
• Ease of capital accumulation: Buying stock is
attractive to investors because stockholders
aren’t liable for the corporation’s acts and
debts, stocks usually are transferred easily,
the life of the corporation is unlimited, and
stockholders aren’t corporate agents.
Disadvantages:
• Government regulation: A corporation must
meet requirements of a state’s
incorporation law.
• Corporate taxation: Corporations are subject to
the same property and payroll taxes as
proprietorships and partnerships plus
additional taxes.
• Double taxation of profits
• Possible conflicts between management and
shareholders,
Rights of a Shareholder:
1. To be issued certificate of stock or other evidence of share
of ownership and to transfer such shares.
2. To attend and vote in person or by proxy at shareholders’
meetings.
3. To elect and remove directors.
4. To adopt, amend or repeal the by-laws.
5. To purchase a portion of any new shares issued to maintain
the same percentage of stock ownership.
6. To receive dividends when declared.
7. To inspect corporate books and records, and to receive
financial reports of the corporation’s operations.
8. To participate in the distribution of corporate assets
upon dissolution.
Articles of Incorporation
➢ A document containing substantially all information
about the corporation, such as:
1. name of the corporation;
2. specific purpose/s for which the corporation is formed;
3. principal place of business which must be within the Phils.;
4. term of existence;
5. names, nationalities and residences of the incorporators;
6. number of directors or trustees (5-15);
7. names, nationalities and residences of the persons who
shall act as directors or trusteed until the first regular
directors or trustees are elected and qualified;
8. amount authorized share capital in pesos; number of shares;
whether par value or no-par values shares
Number and Qualifications of Incorporators.
➢ Any person, partnership, association or corporation,
singly or jointly with others but not more than fifteen
(15) in number, may organize a corporation for any
lawful purpose or purposes:
➢ Provided, That natural persons who are licensed to
practice a profession, and partnerships or associations
organized for the purpose of practicing a profession,
shall not be allowed to organize as a corporation unless
otherwise provided under special laws.
 Incorporators who are natural persons must be of
legal age.
Each incorporator of a stock corporation must own or
be a subscriber to at least one (1) share of the capital stock.
A corporation with a single stockholder is considered
a One Person Corporation as described in Title XIII,
Chapter III of the Revised Corporation Code of the
Philippines.
A One Person Corporation is a corporation with a
single stockholder: Provided, That only a natural person
(who is not exercising a profession) trust, or an estate may
form a One Person Corporation.
By-Laws
➢ Are the rules of action adopted by the
corporation for its internal government and
for the government of its officers, shareholders
or members.
CHARACTERISTICS OF SHARES

➢ Shares of ownership in a corporation are share capital.

➢ Shares owned by shareholders are referred to as
outstanding shares.
➢ The creditors of a corporation have no legal claim
against shareholders.
➢ The law requires, however, that a specific minimum
contribution of shareholders be held by the corporation
as protection for creditors and is known as legal capital.
Classes of Shares in General

1. Par value shares – one which has a specific amount

fixed in the articles of incorporation and appearing
on the certificate of stock. It is the minimum issue
price.
2. No-par value shares – one without any value appearing
on the face of the certificate of stock.
- either with stated value or no-stated value; minimum
stated value is P5.00
- That the entire consideration received by the
corporation for its no-par value shares shall be
treated as capital and shall not be available for
distribution as dividends.
3. Voting shares – those issued with the right to vote.
4. Non-voting shares – those issued without the right to vote.
5. Ordinary shares – entitle the holder to an equal pro-rata
division of profits without any preference.
6. Preference shares – entitle the holder to certain
advantages or benefits over the holders of ordinary
shares.
7. Promotion shares – issued to promoters as compensation
in promoting the incorporation of a corporation.
8. Treasury shares – a share that has been issued by the
corporation as fully paid and later reacquired but
not retired.
9. Convertible shares – a share which is convertible or
changeable from one class to another class.
Sample Share Certificate
SEC. 12 of the Revised Corporation Code of the
Philippines - Minimum Capital Stock Not Required
of Stock Corporations.

Stock corporations shall not be required to

have a minimum capital stock, except as otherwise
specifically provided by special law.
Amount of capital stock to be subscribed and paid for
the purposes of
incorporation. - At least twenty-five percent (25%) of
the authorized capital stock as stated in the articles of
incorporation must be subscribed at the time of
incorporation, and at least twenty-five (25%) per cent
of the total subscription must be paid upon
subscription, the balance to be payable on a date or
dates fixed in the contract of subscription without need
of call, or in the absence of a fixed date or dates, upon
call for payment by the board of directors: Provided,
however, That in no case shall the paid-up capital be
less than five Thousand (₱5,000.00) pesos.
Ten persons decided to organize a corporation. Which of the
following situation illustrates best the minimum
requirement of the law to capital formation?

Authorized Capital Subscribed Capital Paid-in Capital

A. ₱100,000 ₱ 20,000 ₱ 5,000
B. ₱100,000 ₱ 25,000 ₱ 5,000
C. ₱100,000 ₱ 25,000 ₱ 6,250
D. ₱100,000 ₱ 30,000 ₱ 6,000
ACCOUNTING FOR CORPORATION

SHARE CAPITAL
SHAREHOLDERS' EQUITY - owners' equity of a
corporation.
Composition:
1. Share capital (contributed or paid-in capital);
2. Retained earnings.
Share capital - represents the funds paid for shares of
stock. When more than one class of stock is issued,
separate paid-in capital accounts are maintained.
Retained earnings - account should normally have a credit
balance, and it represents past net income that has
been accumulated by the corporation.
Dividends are paid out of retained earnings resulting
in debit to retained earnings account.
* Deficit – occurs when retained earnings account
in itself has a debit balance.
SHARE CAPITAL
- the shares to be subscribed and paid in or secured to
be paid by the shareholders (either in money,
property or services), at the time of organization of
the corporation or afterwards.

Composition:
1. Legal capital – is the portion of the contributed capital
or the minimum amount of paid-in capital, which must
remain in the corporation for the protection of
corporate creditors.
 *Par value shares = aggregate par value of all issued
and subscribed shares
*No-par value shares = total consideration received
by the corporation. Including the excess of
issue price over the stated value.

2. Share premium- the portion of the paid-in capital

representing the amounts paid by the shareholders in
excess of par.
The shareholders’ equity section of Crisostomo Co.
revealed the following information on Dec. 31, 2019:
Preference shares, ₱100 par ₱ 2,300,000
Share premium – preference 805,000
Ordinary shares, ₱ 15 par 5,250,000
Share premium, ordinary 2,750,000
Subscribed ordinary shares 50,000
Retained earnings 1,900,000
Notes payable 4,000,000
Subscription receivable 400,000
How much is the legal capital?
Terms related to share capital
1. Authorized share capital – the maximum number of
shares the corporation can issued as specified in the
article of incorporation.
- It is equal to the maximum number of shares x par
value per share.
2. Issued share capital – shares which have been sold and
paid for in full, may include treasury shares.
3. Subscribed share capital–portion of the authorized share
capital that has been subscribed but not yet fully paid.
4. Outstanding share capital – are issued shares and in the
hands of the shareholders.
5. Treasury shares- are issued shares acquired by the
corporation but not retired and await to be reissued at
a later date.
The accounts below appeared in the Dec. 31, 2019 trial
balance of the Caderoy Company:

Ordinary Shares, ₱15 par, 20,000 shares

authorized, 18,000 shares issued ₱ 270,000
Subscription Receivable 17,000
Subscribed Ordinary Shares 27,000
Retained Earnings 200,000
Share Premium 95,000
Treasury Stock, 1,000 shares, at cost 25,000
Required: Determine the following:
1. Total authorized ordinary shares
20,000 shares x ₱15 par = ₱300,000
=======
2. Total unissued ordinary shares
Authorized # of shares 20,000 shares
Less: Issued shares 18,000 shares
Unissued shares 2,000 shares
x Par value per share ₱ 15
Total unissued ordinary shares ₱ 30,000
=======
3. Total issued ordinary shares
Issued shares 18,000 shares
x Par value per share ₱15
Total issued ordinary shares ₱270,000
=======
4. Number of shares subscribed
Subscribed Ordinary Shares ₱ 27,000
Divide by: Par value per share ₱ 15
Number of shares subscribed 1,800 shares
=========
5. Total shareholders’ equity
Ordinary Shares, ₱15 par, 20,000 shares
authorized, 18,000 shares issued ₱ 270,000
Add: Subscribed Ordinary Shares ₱27,000
Less: Subscription Receivable 17,000 10,000
Share Premium 95,000
Retained Earnings 200,000
Total ₱575,000
Less: Treasury Stock, 1,000 shares, at cost 25,000
₱575,000
=======
6. Number of outstanding shares
Issued shares 18,000 shares
Less: Treasury shares 1,000 shares
Number of outstanding shares 17,000 shares
==========
Two Basic Types of Shares
1. Ordinary share – represents the basic ownership class of the
corporation.
2. Preference share – gives its owners certain advantages over
ordinary shareholders.

Accounting for Issuance of Share Capital

Entry to record the issuance of share capital:

a. Par value share
* at par: Cash xxx
Share Capital xxx
* above par: Cash xxx
Share Capital xxx
Share Premium xxx
Example:
Roa Corporation’s articles authorized the issuance of 100,000
ordinary shares. Roa’s shares have a par value of ₱100 per share. Roa
sold the following ordinary shares during the first few months of
operations in 2019.
Jan. 3 - Sold 1,000 shares at par value.
Feb. 2 - Sold 5,000 shares at ₱120 per share.

Required: 1. Prepare the journal entries to record each issuance.

Requirement #1:
Jan. 3 – Cash ₱100,000
Share capital ₱100,000

Feb. 2 – Cash 600,000

Share capital 500,000
Share premium 100,000
 Entry to record the issuance of share capital:
a. No- par value share

1. with stated value

* at stated value: Cash xxx

Share Capital xxx
* above stated value Cash xxx
Share Capital xxx
Share Premium xxx

2. without stated value

Cash xxx
Share Capital xxx
Example:

Roa Corporation’s articles authorized the issuance of 100,000

share capital. Roa sold the following shares during the first few months
of operations in 2019.
Jan. 3 - Sold 1,000 shares at stated value.
Feb. 2 - Sold 5,000 shares at ₱120 per share.

Required: Prepare the journal entries to record each issuance under

each independent assumption:
1. no-par with stated value of ₱100 per share.
2. no-par without stated value:
Jan. 3 total proceeds, ₱110,000
Answers:

Assumption 1: No-par with stated value of ₱100 per share.

Jan. 3 - Cash ₱100,000
Share capital ₱100,000

Feb. 2 - Cash 600,000

Share capital 500,000
Share premium 100,000

Assumption 2: No-par with no stated value

Jan. 3 - Cash ₱110,000
Share capital ₱110,000

Feb. 2 – Cash 120,000

Share capital 120,000
Share issuance costs
include: regulatory fees, legal, accounting and other
professional fees, commissions and
underwriter’s fees, printing costs of certificates
and documentary stamp tax and other transaction
taxes.
Accounting treatment:
- deductions from any resulting share premium from the
issuance of the shares or from the retained earnings if share
premium is insufficient.

Pertinent entry to record the incurrence of share issuance costs:

Share premium xxx
Cash xxx
SUBSCRIPTION OF SHARES
Subscription of shares
➢offer shareholders the right to purchase shares at
specified future dates or during predetermined
conversion periods at predetermined prices.
➢ investor has agreed or stated his or her intent to buy
prior to the issue date.
➢ the rights give the investor to own the designated
number of shares to which they have subscribed
once the offering is complete.

Subscription contract contains:

- the number of shares subscribed;
- the subscription price;
- the terms of payment; and
- other conditions of the transaction
Entries pertinent to share subscription:
1. Upon subscription at par:
Subscription Receivable xxx
Subscribed Share Capital xxx
Subscription above par:
Subscription Receivable xxx
Subscribed Share Capital xxx
Share Premium xxx
2. Collection of subscription receivable
Cash xxx
Subscription Receivable xxx
3. Issuance of stock certificate when subscribed
shares are fully paid.
Subscribed Share Capital xxx
Share Capital xxx
Example: Brilliant, Inc. has been authorized to issue
125,000 shares of ₱100 par ordinary shares. The following
2019 transactions relate to the initial issuance of Brilliant
share:

Feb. 1 Brilliant sold subscription for 25,000 shares of stock

at ₱115 per share. Subscribers paid 25% as down
payment.
Mar.1 An installment amounting to 25% of the subscription
price was received.
Apr. 1 Full collection of the subscription balance was
collected and shares were issued.

Required: Prepare journal entries to record the transactions.

Entries pertinent to share subscription:
Feb. 1 - Subscription receivable ₱
Subscribed share capital ₱
Share premium
Cash
Subscription receivable

Mar. 1 - Cash
Subscription receivable

Apr. 1 - Cash
Subscription receivable
Subscribed share capital
Share capital
DELINQUENT SHARES/ HIGHEST BIDDER

Example: Brilliant, Inc. has been authorized to issue

125,000 shares of ₱100 par ordinary shares. The
following were the transactions of Hugo with Brilliant
for 201:
Feb. 1 Subscribed for 25,000 shares of stock at
₱115 per share. Hugo paid 25% as down
payment.
Mar.1 Another 25% of the subscription price was
received from Hugo.
May 1 Hugo failed to settle his subscription
balance after the BOD of Brilliant made a
call for the full payment.
 After complying with the legal procedures for
delinquency sale, a public auction was held for the
delinquent shares. The offer price includes the
subscription receivable balance, the accrued interest
of ₱2,000 and auction sale expenses of ₱1,500. Three
bidders are willing to pay the offer price, namely:
Elena Lair 11,500 shares
Lemuel Tapat 10,000 shares
Diego Onesto 9,500 shares

Required: 1. Prepare journal entries to record the

transactions.
2. Assume, there are no bidders.
Entries pertinent to share subscription:
Feb. 1 - Subscription receivable ₱2,875,000
Subscribed share capital ₱ 2,500,000
Share premium 375,000
Cash 718,750
Subscription receivable 718,750

Mar. 1 - Cash 718,750

Subscription receivable 718,750

To record the accrued interest and auction expenses:

Receivable from the highest bidder 3,500
Interest income 2,000
Cash 1,500
To record sale at public auction
Cash 1,441,000
Subscription receivable 1,437,500
Receivable from the highest bidder 3,500

To record issuance of shares

Subscribed Share Capital 2,500,000
Share Capital 2,500,00

Who is the highest bidder: Diego Onesto

How many shares will Hugo received? 15,500
 In case, there are no bidders, the corporation may bid
for the delinquent shares.

Treasury Shares 1,441,000

Receivable from the highest bidder 1,437,500
Subscription receivable 3,500

To record issuance of shares

Subscribed Share Capital 2,500
Share Capital 2,500
RCCP (Sec. 61) Consideration for Stocks.
Stocks shall not be issued for a consideration less than the par or
issued price thereof. Consideration for the issuance of stock may
be:
(a) Actual cash paid to the corporation;
(b) Property, tangible or intangible, actually received by the
corporation and necessary or convenient for its use and
lawful purposes at a fair valuation equal to the par or issued
value of the stock issued;
(c) Labor performed for or services actually rendered to the
corporation;
(d) Previously incurred indebtedness of the corporation;
(e) Amounts transferred from unrestricted retained earnings to
stated capital;
(f) Outstanding shares exchanged for stocks in the event of
reclassification or conversion;
(g) Shares of stock in another corporation; and/or
(h) Other generally accepted form of consideration.

Where the consideration is other than actual cash, or

consists of intangible property such as patents or copyrights, the
valuation thereof shall initially be determined by the
stockholders or the board of directors, subject to the approval
of the Commission.
 Shares of stock shall not be issued in exchange for
promissory notes or future service. The same considerations
provided in this section, insofar as applicable, may be used
for the issuance of bonds by the corporation. The issued
price of no-par value shares may be fixed in the articles of
incorporation or by the board of directors pursuant to
authority conferred by the articles of incorporation or the
bylaws, or if not so fixed, by the stockholders representing
at least a majority of the outstanding capital stock at a
meeting duly called for the purpose.
TWO METHODS OF
ACCOUNTING FOR
SHARE CAPITAL
TWO METHODS OF ACCOUNTING FOR SHARE CAPITAL

1. Journal Entry Method

2. Memorandum Method

Differences:
1. Share capital authorization
2. Issuance of stock certificate

Similarities:
1. Subscription of shares
2. Collection of subscription receivable
Transactions Journal Entry Method Memo Method
1. Authorization of Unissued Ordinary Shares xx Memo entry: The company was
share capital Authorized Ord. Shares xx authorized to issue P___
ordinary shares, divided into
____ shares, with P___ par.

2. Subscription of Subscription Receivable xx Subscription Receivable xx

shares Subscribed Ord. Shares xx Subscribed Ord. Shares xx

3. Collection of Cash xx Cash xx

subscription Subscription Receivable xx Subscription Receivable xx
receivable

4. Issuance of stock Subscribed Ord. Shares xx Subscribed Ord. Shares xx

certification after Unissued Ord. Shares xx Ordinary Shares xx
full payment
SOFP Presentation
Memorandum Entry Method
Shareholders’ Equity

Authorized Share Capital, ₱100 par, 125,000

shares ₱ 12,500,000
Less: Unissued Ordinary Shares, 100,000 shares 10,000,000
Issued Ordinary Shares ₱ 2,500,000
Subscribed Ordinary Shares ₱ 40,000
Less: Subscription Receivable 10,000 30,000
Share Premium – Ordinary Shares 10,000
Retained Earnings 60,000
Total Shareholders’ Equity ₱ 2,600,000
=======
SOFP Presentation
Journal Entry Method
Shareholders’ Equity

Share Capital. ₱100 par, 125,000 authorized, ₱ 2,500,000

25,000 shares issues
Subscribed Ordinary Shares ₱ 40,000
Less: Subscription Receivable 10,000 30,000
Share Premium 10,000
Retained Earnings 60,000

Total Shareholders’ Equity ₱ 2,600,000

=========
SOFP Presentation
Memorandum Method
Shareholders’ Equity

Ordinary Shares, ₱100 par, 4,000 shares

authorized, 1,000 shares issued ₱100,000
Subscribed Ordinary Shares ₱40,000
Less: Subscription Receivable 10,000 30,000
Share Premium – Ordinary Shares 10,000
Retained Earnings 60,000

Total Shareholders’ Equity ₱200,000

=======
Treasury Shares
Treasury shares: (refer to page 556 – 560)

Pertinent transactions and entries:

1. Purchase of treasury shares

Treasury shares xxx
Cash xxx

2. Reissuance:
a. at cost
Cash xxx
Treasury shares xxx

b. above cost
Cash xxx
Treasury shares xxx
Share premium – TS xxx
c. below cost
Cash xxx
Share premium – TS xxx
Retained earnings xxx
Treasury shares xxx
Retirement of shares
a. Retirement cost < original issuance price

Share capital xxx

Share premium – original issuance xxx
Treasury shares xxx
Share premium – retirement xxx

b. Retirement cost > original issuance price

Share capital xxx
Share premium – original issuance xxx
Share premium – treasury shares xxx
Retained earnings xxx
Treasury shares xxx
Example 1:
Roa Corporation’s articles authorized the issuance of 100,000
ordinary shares. Roa’s shares have a par value of ₱100 per share. Roa
sold the following ordinary shares during the first few months of
operations in 2019.
Jan. 3 - Sold 1,000 shares at par value.
Feb. 2 - Sold 5,000 shares at ₱120 per share.
April 5 - Reacquired 500 shares at a cost of ₱130
per share.
Required: 1. Prepare the journal entries to record each issuance.
2. Determine the following:
a. number of shares issued
b. total amount of share capital
c. amount of share premium
d. number of shares unissued
e. number of outstanding shares
f. total shareholders’ equity
Requirement #1:
Jan. 3 – Cash ₱100,000
Share capital ₱100,000

Feb. 2 – Cash 600,000

Share capital 500,000
Share premium 100,000

Apr. 5 – Treasury shares 65,000

Cash 65,000
Requirement #2:
a. number of shares issued (1,000 + 5,000) = 6,000 shares
=========
b. total amount of share capital
(₱100,000 + ₱500,000) = ₱600,000
=======
c. amount of share premium = ₱100,000
======
d. number of shares unissued
(100,000 – 6,000) = 94,000 shares
==========
e. number of outstanding shares
(6,000 shares issued – 500 treasury shares) = 5,500 shares
=========
f. Total Shareholders’ Equity

Ordinary shares, ₱100 par, 100,000 shares

authorized, 6,000 shares issued ₱600,000
Share Premium – Ordinary Shares 100,000
Total ₱700,000
Less: Treasury shares, 500 shares at cost 65,000
Shareholders’ equity ₱635,000
=======
Example 2:
Roa Corporation’s articles authorized the issuance of 100,000
ordinary shares. Roa’s shares have a par value of ₱100 per share.
Roa sold the following ordinary shares during the first few months
of operations in 2019.
Jan. 3 - Sold 1,000 shares at par value.
Feb. 2 - Sold 5,000 shares at ₱120 per share.
April 5 - Reacquired 500 shares at a cost of ₱130
per share.
May 9 - Reissued 300 shares at ₱150 per share

Required: Journalize the above transactions.

Entries:
Jan. 3 – Cash ₱100,000
Share capital ₱100,000

Feb. 2 – Cash 600,000

Share capital 500,000
Share premium 100,000

Apr. 5 – Treasury shares 65,000

Cash 65,000

May 9 – Cash 45,000

Treasury shares (300/500 x 65,000) 39,000
Share premium – TS 6,000
Example 2:
Roa Corporation’s articles authorized the issuance of 100,000
ordinary shares. Roa’s shares have a par value of ₱100 per share.
Roa sold the following ordinary shares during the first few months
of operations in 2019.
Jan. 3 - Sold 1,000 shares at par value.
Feb. 2 - Sold 5,000 shares at ₱120 per share.
April 5 - Reacquired 500 shares at a cost of ₱130
per share.
May 9 - Reissued 300 shares at ₱125 per share

Required: Journalize the above transactions.

Entries:
Jan. 3 – Cash ₱100,000
Share capital ₱100,000

Feb. 2 – Cash 600,000

Share capital 500,000
Share premium 100,000

Apr. 5 – Treasury shares 65,000

Cash 65,000

May 9 – Cash 37,500

Retained earnings 1,500
Treasury shares (300/500 x 65,000) 39,000
Example 2:
Roa Corporation’s articles authorized the issuance of 100,000
ordinary shares. Roa’s shares have a par value of ₱100 per share.
Roa sold the following ordinary shares during the first few months
of operations in 2019.
Jan. 3 - Sold 1,000 shares at par value.
Feb. 2 - Sold 5,000 shares at ₱120 per share.
April 5 - Reacquired 500 shares from the April 5
issuance at a cost of ₱130 per share and
retired the shares.

Required: Journalize the above transactions.

Entries:
Jan. 3 – Cash ₱100,000
Share capital ₱100,000

Feb. 2 – Cash 600,000

Share capital 500,000
Share premium 100,000

Apr. 5 – Share capital (500 x ₱ 100) 5,000

Share premium 15,000
Cash 65,000
Exercises:

You are given 3 problems.

Instructions: Answer all the questions/problems

and be ready for the Q & A on our next online
class on Dec. 15, 2020 @ 2 p.m.
Exercises:
1. Financial Accounting & Reporting 3rd Ed.
by: Zeus Vernon B. Millan

Problem 4: Multiple Choice (pages 569-572)

Instructions: Answer all the questions and be ready

for the Q & A on our next online class on
Dec. 15, 2020 @ 2 p.m.
2. The Castro Software Company is authorized to issue
80,000 ordinary shares.
Required: Prepare the required entry to record the issuance
of the ordinary shares under each of the following
assumptions:
a. The shares have a ₱5 par value and were sold for
₱20 per share.
b. The shares are no-par but have a stated value of
₱10. The total issue price was ₱850,000.
c. The shares are no-par and have no stated value.
3. The shareholders’ equity section of Blancaflor Techonologies as at
December 31, 2018 appeared as follows:
5% Cumulative Preference Shares, ₱100 par,
50,000 shares authorized,
_____ shares issued ₱ 2,000,000
Ordinary Shares, ₱5 par; 100,000 shares
authorized; 25,000 shares issued ?
Share Premium – ordinary 750,000
Retained earnings 650,000
Required: From these accounts, determine the following:
a. How many preference shares were issued?
b. What was the total issue price of the preference shares?
c. What amount should be recorded in the ordinary shares account?
d. What was the total issue price per share of the ordinary shares?
e. What is the amount of required preference dividends?
f. What is the amount of total shareholders’ equity?